FTWZ Sales Not Supply Under GST, No IGST or Customs Applicable: AAR holds No Dual Registration Needed for Operations in Tamil Nadu [Read Order]

With regards to the clarification on the taxability of Free Trade Warehousing Zone (FTWZ) operations under the GST Act, the Tamil Nadu Authority for Advance Ruling (AAR) has ruled that sales or transactions effected from an FTWZ unit do not constitute a “supply” under the provisions of the CGST Act, and therefore, are not liable to Integrated Goods and Services Tax (IGST) or customs duties.

The AAR further held that an applicant operating out of an FTWZ unit in Chennai, is not required to obtain a separate GST registration in Tamil Nadu for carrying out its operations from the FTWZ premises, directed to continue with the Telangana GST registration details for the tax compliances.

The applicant, West Pharmaceutical Packaging India Pvt. Ltd headquartered in Hyderabad, sought advance ruling on whether transactions from its FTWZ unit in Tamil Nadu would qualify as taxable supplies, whether IGST or customs duties would apply on such movements, and whether dual registration was mandated for the operations undertaken from the FTWZ.

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The company contended that under the Special Economic Zones Act, 2005 and the relevant customs notifications, goods imported and stored within FTWZs remain outside the customs territory until cleared for home consumption. Thus, transactions involving movement of goods within the FTWZ or for export are not deemed as taxable events under GST.

The bench of B. Susee Kumar and Balakrishna S agreed with the applicant's stance and explained that, provided there is no movement for domestic use, FTWZ transactions including warehousing, repackaging, labeling, or subsequent exports do not qualify as "supply" under Section 7 of the CGST Act read with Schedule I or II. As a result, these activities are not covered by GST and are not subject to IGST or customs duties when they take place within the FTWZ.

On the issue of registration, the AAR noted that the applicant already held a valid GST registration in Telangana, and that the Chennai FTWZ unit operated merely as an extension or logistics node, not engaging in local taxable outward supplies within Tamil Nadu. Hence, no separate GST registration under Section 22 of the CGST Act was required in Tamil Nadu for such warehousing or FTWZ-specific operations.

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